Friday 1st December, 2023

What Will The Housing Market Be Like In 2024?

A Continued Fall Of Building Consents Per Month

Building consents had an 11-year boom which saw building consents per month exceed 4,000.

As of the time of writing, it has fallen to around 3,000 & is likely to continue to fall in 2024.

Why’s that?

Property prices have fallen while the cost of building homes has gone up.

What does this mean?

Property developers will sit on their cash waiting for home prices to go up before pursuing new projects.

The Average Kiwi Will Begin To Notice The Bounce Back In Property Prices

Since the peak in November 2021, property prices have fallen 18%.

Property prices bottomed out in May 2023 & since then began recovery.

Creeping up around 3.8%.

Individuals keeping up with the property market will have noticed the recovery by now, but average Kiwi wouldn’t have.

In early 2024, it can be expected that the average Kiwi will talk more positively about the property market.

The National & Act Roll Back Taxes

Property investors will most likely benefit from lower taxes in the coming year.

Investors will probably get :

• A return of the bright-line test to 2 years

• Interest deductibility phased back in

• No cause termination back

National & Act Party coalition agreement has just been released & it looks like lower taxes for landlords will come in sooner than expected.

Investors Still Suffering From High-Interest Rates

Independent & well-respected economist, Tony Alexander, believes the RBNZ will not raise the OCR in 2024. 

However, ANZ believes interest rates will peak in March 2024.

According to Opes Partners, 9 in 10 properties bought at the moment in negatively geared (requiring top-ups).

Inflation Starts To Fall In July

At the moment, inflation is sitting at 5.6%.

Banks believe by July 2024, inflation will be around 2.5% to 4.0%.

Some prices are beginning to fall faster than expected but the increase in migration will apply upward pressure on inflation.

If inflation begins to fall off in mid-2024, it will set the stage for interest rates to fall.

Rents Continue To Rise

There are a ton of people moving to New Zealand at the moment.

These people will need a place to live.

Which applies upward pressure on the rental market.

Ed McKnight from Opes Partners believes rents will go up more than 5% in the coming year.

That’s A Wrap

Every investor in the real estate market or looking to enter must have access to a rental property cashflow calculator.

Why?

• It evaluates the profitability of a rental property

• Gives insight into the return on investment

• Allows you to make informed decisions about buying, selling, or holding a property.

• Assists in creating accurate budgets.

• Helps track the financial performance of rental properties.

Talk to you tomorrow,

Alvin Zhong